International Prices and Endogenous Quality

Robert Feenstra and John Romalis

The Quarterly Journal of Economics, 2014, vol. 129, issue 2, 477-527

Abstract: The unit values of internationally traded goods are heavily influenced by quality. We model this in an extended monopolistic competition framework where, in addition to choosing price, firms simultaneously choose quality subject to nonhomothetic demand. We estimate quality and quality-adjusted price indexes for 185 countries over 1984–2011. Our estimates are less sensitive to assumptions about the extensive margin of firms than are purely “demand-side” estimates. We find that quality-adjusted prices vary much less across countries than do unit values and, surprisingly, the quality-adjusted terms of trade are negatively related to countries’ level of income.

Date: 2014
References: Add references at CitEc
Citations: View citations in EconPapers (334)

Downloads: (external link)
http://hdl.handle.net/10.1093/qje/qju001 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: International Prices and Endogenous Quality (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:qjecon:v:129:y:2014:i:2:p:477-527

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

The Quarterly Journal of Economics is currently edited by Robert J. Barro, Lawrence F. Katz, Nathan Nunn, Andrei Shleifer and Stefanie Stantcheva

More articles in The Quarterly Journal of Economics from President and Fellows of Harvard College
Bibliographic data for series maintained by Oxford University Press ().